Taking Advantage of Negative Oil Prices

The coronavirus has severely reduced oil demand around the world due to large declines in airline, car, shipping, and trucking traffic as well as manufacturing production. This overall leads to an excess amount of supply with no where to go. Companies that produce crude oil need a place to store it and resort to barrels in warehouses or ships. The storage of the oil costs money and suppliers would rather pay someone to take their crude oil than shut down their operation and risk going bankrupt.

There are a few ways to take advantage of the negative oil prices. You can trade crude oil futures, a very risky and expensive contract that is worth 1000 barrels of oil. The more conservative route to take advantage of the oil price crash is to buy stock options in an oil ETF like $DBO or $USL. Those are the two best oil stocks to invest in right now if your investment time line is more than six months.

From a technical analysis perspective, we are looking for an extreme oversold bounce to happen as crude starts to test VERY historic support levels. This trade is set up with minimal risk and large up side potential, what we like to call a great risk vs reward. No matter how you slice the cake, these oil stocks will be on top of our watchlists for the rest of the foreseeable future.

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